Megan Alexander

Megan Alexander asked about cocoa's impact on Hershey's margin framework, specifically whether recent declines benefit 2026 or 2027, and if gross margins are expected to return to historical levels. She also questioned the durability of increased brand investments made in 2026 into 2027, and the need for incremental reinvestment as gross margins expand.

Answer

SVP and CFO Steve Voskuil stated that cocoa financial markets are reflecting fundamentals, and a larger supply surplus is anticipated for 2025 and 2026. He noted that 2026 hedging is above current market levels, suggesting upside for deflation in 2027, and expects continued progress towards historical gross margin levels. He also explained that 2026 brand investments are multi-year, laying a foundation for future growth while balancing margin recovery, with more details to be shared at the investor conference.

Megan Alexander asked about the impact of cocoa on Hershey's 2026 margin framework, specifically whether recent declines offer a benefit for 2026 or if it's a 2027 tailwind, and the expectation for gross margin recovery towards historical levels in 2027. She also inquired about the durability of increased brand investments in 2026 into 2027 and the need for incremental reinvestment as gross margins expand.

Answer

Steve Voskuil (SVP and CFO) stated that cocoa financial markets are reflecting fundamentals, anticipating a larger supply surplus and demand contraction, suggesting potential upside for further deflation in 2027 as 2026 hedging is above current market levels. He noted that 2026 investments are multi-year, laying a foundation for 2027 and beyond, focusing on R&D, innovation, and brand building. Kirk Tanner (President and CEO) added that more details on brand building and R&D for sustainable long-term growth will be shared at the March investor conference.

Megan Alexander followed up on the decision to reiterate guidance despite a new price increase, asking if it was a prudent measure to retain flexibility given macro uncertainty. She also asked for an explanation of the strong 38.5% gross margin in Q1 and the expected phasing for the remainder of the year.

Answer

President and CEO Russell Diez-Canseco agreed it was a prudent approach to ensure delivery on commitments. CFO Thilo Wrede explained that Q1 gross margin was as expected, appearing lower year-over-year due to an exceptionally efficient prior-year quarter and current-quarter costs from staffing up ahead of growth. He cautioned not to expect similar gross margin levels for the rest of the year due to tough comps, tariffs, and commodity costs.

Megan Christine Alexander of Robert W. Baird & Co. inquired about the decision to pause guidance, asking if it was driven by changes in consumer demand or simply reduced visibility from tariffs. She also requested a breakdown of the tariff mitigation actions and the expected timing for any pricing decisions.

Answer

President and CEO David Maher clarified that not updating guidance in Q1 is standard practice for Acushnet and not a 'pause,' reiterating the first-half outlook based on stable consumer behavior. CFO Sean Sullivan detailed the mitigation strategy, confirming that pricing is a last resort. He outlined the primary actions as redirecting sourcing to lower-tariff regions, negotiating with suppliers, and leveraging their diversified supply chain, particularly for golf clubs and FootJoy apparel.

Megan Alexander sought clarification on whether fully offsetting tariff costs was a 2025 or long-term goal and asked about the rationale for pausing guidance, including what visibility is needed to reinstate it.

Answer

CFO Anthony DiSilvestro confirmed that the actions taken are designed to fully offset the incremental tariff cost impact within 2025. He clarified that the decision to pause guidance is driven primarily by uncertainty around the consumer demand outlook for the remainder of the year, not the cost impact. CEO Ynon Kreiz added that the situation remains volatile and is still evolving.

Megan Alexander asked for clarification on how high-single-digit declines in both POS and retail inventory could align with a smaller 3% decline in gross billings. She also questioned the reason for the lowered top-line guidance, given the unchanged industry outlook.

Answer

CFO Anthony DiSilvestro noted that while there can be quarterly volatility, year-to-date gross billings and POS are fairly aligned. He emphasized that retailer inventory is down and of good quality. Regarding the guidance change, he stated there were no specific drivers to call out, but it reflects an assessment of year-to-date results, while still expecting Q4 sales growth and market share gains.

Megan Alexander questioned the Packaged Meats guidance, which implies a slight profit decline at the midpoint despite a stated goal of increasing profits, asking for the key puts and takes. She also asked if the strong Q1 outlook for Hog Production would more than offset pressures in other segments, allowing for total Q1 profit growth.

Answer

President of Packaged Meats Steve France explained the guidance range accounts for higher input costs and a cautious consumer, which they aim to mitigate through strategies like formula pricing. CFO Mark Hall confirmed that for Q1, the significant year-over-year improvement in Hog Production is expected to offset timing and raw material pressures in the Packaged Meats and Fresh Pork segments.

Megan Alexander sought clarification on the visitation outlook, asking if the company still expects visitation to improve from the current -2.5% level. She also asked for historical perspective on how factors like consumer softness and the Park City strike might impact the upcoming pass sales season.

Answer

CEO Kirsten Lynch and CFO Angela Korch clarified that while they expect an improved trend from the current -2.5% season-to-date visitation, they do not expect visitation to turn positive for the full year due to industry demand normalization. Regarding pass sales, Lynch noted the company took immediate action with credits for Park City guests to earn back loyalty and expressed optimism for the selling season.

Megan Alexander from Morgan Stanley questioned if high lift ticket prices, not just weather, were impacting demand and asked about Vail's broader pricing strategy. She also asked for an outlook on 2025 visitation, considering weather recovery, normalization, and lower initial pass sales.

Answer

CEO Kirsten Lynch defended the pricing strategy, stating it's designed to drive advanced commitment through products like the Epic Day Pass. She believes the 17% decline in lift ticket visitation was driven by conditions and industry normalization, not price, pointing to the network's affordable options at local resorts. Regarding 2025 visitation, Lynch noted it's hard to quantify the ongoing normalization trend but believes the ski industry is returning to a more normalized trend, with more guidance to come in September.

Megan Alexander asked for the rationale behind the updated leverage target of around 2x and inquired about the sale-leaseback strategy, including market conditions for 2025.

Answer

Founder, Chairman and CEO Bahram Akradi clarified the target is a 1.75x to 2.25x debt-to-EBITDA ratio, which he deems appropriate for a strong BB credit given the company's substantial real estate assets. He described the sale-leaseback market as 'incredibly robust,' stating plans to conduct $250-$300 million in transactions annually to recycle capital into new growth projects, with an expectation of more favorable cap rates by mid-2025.

Megan Alexander sought clarification on the year-end global weeks on hand target and asked for help reconciling how wholesale shipments could be ahead of retail in 2025 if inventory weeks are not expected to increase.

Answer

CEO David Foulkes confirmed the year-end U.S. weeks on hand target is in the high 30s, consistent with prior expectations, and noted premium product inventory remains low. CFO Ryan Gwillim clarified that wholesale in 2025 is expected to be ahead of wholesale in 2024, not necessarily ahead of retail in 2025. Given the significant under-shipment of retail in 2024, a simple one-to-one wholesale-to-retail match in 2025 would represent a year-over-year wholesale increase.

Megan Alexander of Morgan Stanley inquired about the intra-quarter trend of the 13% retail sales decline in Q3 and how that performance informed the Q4 outlook.

Answer

CEO Jochen Zeitz explained that Q3 began with a strong July but weakened more than expected in late September, a trend consistent with the broader powersports industry. He attributed the slowdown to macroeconomic uncertainty, interest rate pressures, the upcoming U.S. election, and certain weather events.

Megan Christine Alexander questioned the progress on dealer inventory reduction, noting her analysis suggested a sequential increase, and asked if destocking might extend into 2025. She also inquired about the retail outlook for Q4 and whether management expects demand to stabilize in 2025.

Answer

CEO Mike Speetzen clarified that core ORV inventory is down sequentially when excluding seasonal youth and snowmobile shipments. He reaffirmed the company's commitment to achieving a 15-20% year-over-year reduction by year-end, with the most significant cuts scheduled for Q4. Speetzen stated it's too early to predict a 2025 retail rebound, citing persistent consumer financial stress, and noted the company is positioning for a continued challenging environment by lowering dealer inventory to historic lows in terms of days sales outstanding (DSO).